1) The following information pertains to inventory held by a company at December 31,
2013.
As a result of inventory loss, what is the difference in income between reporting using
U.S. GAAP and IFRS?
A.U.S. GAAP income is $1,000 higher.
B.U.S. GAAP income is $2,000 lower.
C.IFRS income is $1,000 higher.
D.IFRS income is $1,000 lower.
E.IFRS income is $5,000 higher.
2) Gibson Corp. owned a 90% interest in Sparis Co. Sparis frequently made sales of
inventory to Gibson. The sales, which include a markup over cost of 25%, were
$420,000 in 2012 and $500,000 in 2013. At the end of each year, Gibson still owned
30% of the goods. Net income for Sparis was $912,000 during 2013. What was the
non-controlling interest’s share of Sparis’ net income for 2013?
A) $85,680.
B) $90,600.
C) $90,720.
D) $91,680.
E) $91,800.
3) Quadros Inc., a Portuguese firm was acquired by a U.S. company on January 1,
2012. Selected account balances are available for the year ended December 31, 2013,
and are stated in Euro, the local currency.
Assume the functional currency is the Euro; compute the U.S. balance sheet amount for
inventory at December 31, 2013
A.$18,800
B.$19,600
C.$18,000
D.$20,200
E.$19,000
4) On January 1, 2012, Dawson, Incorporated, paid $100,000 for a 30% interest in
Sacco Corporation. This investee had assets with a book value of $550,000 and
liabilities of $300,000. A patent held by Sacco having a book value of $10,000 was
actually worth $40,000 with a six year remaining life. Any goodwill associated with this
acquisition is considered to have an indefinite life. During 2012, Sacco reported income
of $50,000 and paid dividends of $20,000 while in 2013 it reported income of $75,000
and dividends of $30,000. Assume Dawson has the ability to significantly influence the
operations of Sacco.
The equity in income of Sacco for 2012, is
A) $ 9,000.
B) $13,500.
C) $15,000.
D) $ 7,500.
E) $50,000.
5) Perry Company acquires 100% of the stock of Hurley Corporation on January 1,
2012, for $3,800 cash. As of that date Hurley has the following trial balance;
Compute
goodwill, if any, at January 1, 2012.
A) $ 150.
B) $ 250.
C) $ 700.
D) $1,200.
E) $ 550.
6) Perry Company acquires 100% of the stock of Hurley Corporation on January 1,
2012, for $3,800 cash. As of that date Hurley has the following trial balance;
Compute
the amount of Hurley’s equipment that would be reported in a December 31, 2013,
consolidated balance sheet.
A) $ 0.
B) $1,000.
C) $1,250.
D) $1,125.
E) $1,200.
7) Consolidated accounts payable decreased by $7,000.
How is the loss on sale of land reported on the consolidated statement of cash flows?
A) $20,000 added to net income as an operating activity.
B) $20,000 deducted from net income as an operating activity.
C) $15,000 deducted from net income as an operating activity.
D) $5,000 added to net income as an operating activity.
E) $5,000 deducted from net income as an operating activity.
8) On January 1, 2013, Nichols Company acquired 80% of Smith Company’s common
stock and 40% of its non-voting, cumulative preferred stock. The consideration
transferred by Nichols was $1,200,000 for the common and $124,000 for the preferred.
Any excess acquisition-date fair value over book value is considered goodwill. The
capital structure of Smith immediately prior to the acquisition is:
Compute the non-controlling interest in Smith at date of acquisition.
A) $486,000.
B) $480,000.
C) $300,000.
D) $150,000.
E) $120,000.
9) Dean Hardware, Inc. is comprised of five operating segments. Information about
each of these segments is as follows (in thousands):
Which operating segments are reportable under the revenue test?
A.Pails and Hardware.
B.Rakes, Pails, and Hardware.
C.Rakes, Hardware, and Accessories.
D.Rakes and Pails.
E.Rakes and Hardware.
10) Acker Inc. bought 40% of Howell Co. on January 1, 2012 for $576,000. The equity
method of accounting was used. The book value and fair value of the net assets of
Howell on that date were $1,440,000. Acker began supplying inventory to Howell as
follows:
Howell reported net income of $100,000 in 2012 and $120,000 in 2013 while paying
$40,000 in dividends each year.
What is the Equity in Howell Income that should be reported by Acker in 2012?
A) $10,000.
B) $24,000.
C) $36,000.
D) $38,400.
E) $40,000.
11) Which entry would be the correct entry to record that a hospital has provided patient
services for $200,000, of which 25% will be billed to a third party?
A.Option A
B.Option B
C.Option C
D.Option D
E.Option E
12) Perry Company acquires 100% of the stock of Hurley Corporation on January 1,
2012, for $3,800 cash. As of that date Hurley has the following trial balance;
Compute
the amount of Hurley’s long-term liabilities that would be reported in a December 31,
2013, consolidated balance sheet.
A) $1,700.
B) $1,800.
C) $1,650.
D) $1,750.
E) $3,500.
13) Following are selected accounts for Green Corporation and Vega Company as of
December 31, 2015. Several of Green’s accounts have been omitted.
Green acquired 100% of Vega on January 1, 2011, by issuing 10,500 shares of its $10
par value common stock with a fair value of $95 per share. On January 1, 2011, Vega’s
land was undervalued by $40,000, its buildings were overvalued by $30,000, and
equipment was undervalued by $80,000. The buildings have a 20-year life and the
equipment has a 10-year life. $50,000 was attributed to an unrecorded trademark with a
16-year remaining life. There was no goodwill associated with this investment.
Compute the December 31, 2015, consolidated land.
A) $220,000.
B) $180,000.
C) $670,000.
D) $630,000.
E) $450,000.
14) On January 1, 2013, the partners of Won, Cadel, and Dax (who shared profits and
losses in the ratio of 5:3:2, respectively) decided to liquidate their partnership. The trial
balance at this date was as follows:
The partners planned a program of piecemeal conversion of the business assets to
minimize liquidation losses. All available cash, less an amount retained to provide for
future expenses, was to be distributed to the partners at the end of each month. A
summary of liquidation transactions follows:
Prepare a schedule to calculate the safe payments to be made to the partners at the end
of March.
15) The estate of Kent Talbert reported the following information:
Required:
Prepare a schedule to show the amount of the taxable estate.
16) For the month of December 2013, patient charges at Northfield Hospital (a
not-for-profit hospital) were $2,720,000. Third-party payors were billed $1,800,000.
$520,000 of the $2,720,000 was expected to be uncollectible.
Required:
Prepare the necessary journal entry to record the anticipated uncollectible amount.
17) On January 1, 2013, Wakefield City purchased $40,000 office supplies. During the
year $35,000 of these supplies were used.
Required:
Record the journal entries for these transactions using the purchases method. (Disregard
the encumbrance entries.)
18) The balance sheet of Rogers, Dennis & Berry LLP prior to liquidation included the
following:
The three partners shared net income and losses in a 5:3:2 ratio, respectively. Noncash
assets were sold for $60,000. Creditors were paid in full, partners were paid $35,000,
and the balance of cash was retained pending future developments.
Record the journal entry for payment of outstanding liabilities to the creditors.
19) For May 2013, Carlington Hospital’s charges for patient services were $608,000, of
which 80% was billed to third-party payors.
Required:
Prepare the journal entry to accrue patient charges for the month.
20) Pursley, Inc. owns 70 percent of Harry Corp. The consolidated income statement for
a year reports $50,000 Non-controlling Interest in Harry Corp.’s Income. Harry paid
dividends in the amount of $80,000 for the year. What are the effects of these
transactions in the consolidated statement of cash flows for the year?